Sequestration's defense equation

6 Sep 2012

The Pentagon's top buyer tried to simplify sequestration planning for defense industry executives clamoring for details on the federal budget cuts that will reduce defense spending over the next decade.

"If you want to know what will happen to your program, look at how much money you expect to have in your budget next year and cut 11 percent," Frank Kendall, U.S. undersecretary of defense for acquisition, technology and logistics, told defense industry officials at the ComDef 2012 conference in Washington Wednesday.

Kendall explained it's a "stupid way" to cut a budget, but the Pentagon's hands are tied when it comes to sequestration -- the agreement made by Congress to cut the federal budget by 10 percent to include about $500 billion from defense spending over the next ten years. The deadline of Jan. 2 hangs over Congress to come to an agreement to avoid sequestration, or at the least delay it.

The White House Office of Management and Budget is scheduled to release a detailed report specifying how sequestration cuts will affect the Pentagon after President Obama ordered the report in August. Capitol Hill sources expect to see the report in the next couple weeks.

Although Kendall tried to simplify the complexity of the cuts with simple arithmetic, the defense industry is eager to see what the OMB report will contain. Defense Secretary Leon Panetta has told Congress the military has done minimal planning because of the simplicity of the across the board cut.

But the actions thus far have shown the military has found loop holes to protect certain parts of its budget from the cuts. Obama has already said the military's personnel budget will be protected to include troops' pay. Parts of the Department of Veterans Affairs budget will also be protected.

Defense analysts have questioned just how far these exceptions will run and how creative the Pentagon will get to protect certain purses should the sequestration cuts go through.

Kendall emphasized that "there is no flexibility in the law," and the sequestration cuts will even affect the Overseas Contingency Operations budget -- the money used by Pentagon to pay for the war in Afghanistan. It's here where analysts get skeptical. If the Pentagon can avoid making cuts to certain parts of the VA, why wouldn't it make the same exceptions for soldiers deployed to Afghanistan.

There's also the question of how sequestration will affect mult-year contracts. Pentagon leaders to include Marine Corps Commandant Gen. James Amos have already said they anticipate having to absorb more losses by renegotiating those contracts to account for sequestration cuts.

How the Pentagon plans to pay for these higher bills at a time defense spending is shrinking is the information defense executives want. It makes the simple equation that Kendall laid out Wednesday a lot more complex than Pentagon leaders want to admit.